Sri Dattatreya Construction & Services (P) Ltd., Visakhapatnam V. The ACIT, Circle-1., Kakinada

CO 49/VIZ/2013

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1553 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 4 month(s) 23 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 04-07-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

ITA NOS.340&341/VIZAG/2012 & CO NOS.49&50/VIZAG/201 3 SRI DATTATREYA CONSTRUCTION & SERVICES, VISAKHAPATN AM 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . . . . , ,, , . . . . , , , , % % % % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER . .. ./ // / I.T.A.NO.340&341/VIZAG/2012 ( / ASSESSMENT YEARS : 2006-07 & 2007-08 ) ACIT CIRCLE-1 KAKINADA VS. SRI DATTATREYA CONSTRUCTION & SERVICES VISAKHAPATNAM [ PAN:AAHCS 3450Q] (, , , , / APPELLANT) (-., -., -., -., / RESPONDENT ) C.O. NOS.49&50/VIZAG/2013 (ARISING OUT OF I.T.A.NO.340&341/VIZAG/2012) ( / ASSESSMENT YEARS : 2006-07 & 2007-08 ) SRI DATTATREYA CONSTRUCTION & SERVICES VISAKHAPATNAM VS. ACIT CIRCLE - 1 KAKINADA (, , , , / APPELLANT) (-., -., -., -., / RESPONDENT ) , / / APPELLANT BY : SHRI M.N. MURTHY NAIK, DR -., / / RESPONDENT BY : SHRI G.V.N. HARI, AR / 3 / DATE OF HEARING : 04.11.2015 / 3 / DATE OF PRONOUNCEMENT : 27.11.2015 ITA NOS.340&341/VIZAG/2012 & CO NOS.49&50/VIZAG/201 3 SRI DATTATREYA CONSTRUCTION & SERVICES, VISAKHAPATN AM 2 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THESE APPEALS ARE FILED BY THE REVENUE AND THE CROS S APPEALS ARE FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT( A), VISAKHAPATNAM FOR THE ASSESSMENT YEARS 2006-07 & 2007-08. 2. FACTS ARE IN BRIEF THAT THE ASSESSEE IS A PRIVAT E LIMITED COMPANY ENGAGED IN CIVIL CONTRACT WORKS FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2006-07 BY ADMITTING TOTAL INCOME OF RS.89,53, 940/-. THE RETURN FILED BY THE ASSESSEE WAS PROCESSED INITIALLY U/S 1 43(1) OF THE INCOME- TAX ACT, 1961 (HEREINAFTER CALLED AS THE ACT). T HEREAFTER DUE PROCESS ASSESSMENTS WERE COMPLETED U/S 143(3) OF THE ACT BY DETERMINING TOTAL INCOME AT RS.95,37,376/-. SUBSEQUENTLY THE ASSESSM ENT WAS REOPENED U/S 147 OF THE ACT BY ISSUING A NOTICE U/S 148 OF T HE ACT AND ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT R.W.S. 147 OF T HE ACT. 3. IN THE ASSESSMENT ORDER, THE AO HAS OBSERVED THA T MOST OF THE EXPENDITURE PAID BY THE ASSESSEE IN CASH AND THERE ARE NO PROPER BILLS ETC. EVIDENCING THE NAMES AND ADDRESSES OF THE RECI PIENTS THEREBY MAKING IT DIFFICULT TO SUBJECT THESE BILLS AND VOUC HERS FOR CROSS VERIFICATION. HOWEVER, TAKING INTO ACCOUNT THE ASS ESSEES BUSINESS WHICH ITA NOS.340&341/VIZAG/2012 & CO NOS.49&50/VIZAG/201 3 SRI DATTATREYA CONSTRUCTION & SERVICES, VISAKHAPATN AM 3 IS EARTH FILLING AND LIFTING AND TRANSPORTATION OF READY CONCRETE MIX INVOLVING LARGE NUMBER OF LABOURERS, IT IS FELT THA T A DISALLOWANCE OF 10% OF THE ABOVE EXPENDITURE WOULD MEET ENDS OF THE JUS TICE. ACCORDINGLY, HE HAS DISALLOWED RS.46,01,562/-. ON APPEAL THE LD . CIT(A) CONSIDERED THE ENTIRE FACTUAL MATRIX OF THE CASE AND DELETED T HE ADDITION MADE BY THE AO BY OBSERVING AS UNDER: I HAVE CONSIDERED THE ARGUMENTS OF THE ASSESSEE. IT IS SEEN FROM THE ARGUMENTS THAT THE ASSESSEE IS MIXING UP ESTIMA TED DISALLOWANCE AND REASONS FOR REOPENING. THE REASON FOR REOPENING IS NOT TO MAKE ESTIMATED DISALLOWANCE. AS ALREADY STATED THE ADDI TIONS MADE WITH REGARD TO THE REASONS FOR REOPENING HAVE NOT BEEN QUESTION ED BY THE ASSESSEE. IT IS NOW AN ACCEPTED PRINCIPLE OF LAW THAT ONCE THE ASSESSMENT IS REOPENED, THE ENTIRE ASSESSMENT IS AT LARGE AND ASS ESSING OFFICER CAN GO BEYOND THE REASONS FOR WHICH THE ASSESSMENT IS OPEN ED. THUS AO IS IN PRINCIPLE NOT BARRED FROM MAKING ANY ESTIMATED DISA LLOWANCE IN THE REOPENED ASSESSMENT. HOWEVER FOR ANY DISALLOWANCE T HERE HAS TO BE A SPECIFIC REASON AND IN THE INSTANT CASE I FIND THAT AO DID NOT SPECIFY ANY REASON OR DEFICIENCY IN THE VOUCHERS MAINTAINED BY ASSESSEE WHICH WARRANTED SUCH HEAVY DISALLOWANCE. IT IS NOT OUT OF PLACE HERE TO MENTION THAT THERE WAS A SURVEY IN THE PREMISES OF THE ASSESSEE ON 04.10.2005. THERE IS NO MENTION OF ANY SPECIFIC FIN DING THAT THERE ARE ANY DEFICIENCIES NOTICED IN THE BOOKS OF ACCOUNT DURING SURVEY. DURING ORIGINAL ASSESSMENT IN ASSESSMENT YEAR 2006-07 AD R ECORDED A FINDING THAT BILLS/VOUCHERS WERE VERIFIED. AD DID N OT POINT-OUT ANY SPECIFIC LACUNAE IN THE BILLS EITHER DURING THE ORI GINAL ASSESSMENT OR DURING REASSESSMENT PROCEEDINGS. THE ORIGINAL ASSES SMENT WAS COMPLETED BY DISALLOWING REGISTRATION CHARGES OF QU ARRY LAND AND DEPRECIATION CLAIMED ON THE SAME. NO DISALLOWANCE O UT OF THE EXPENDITURE IS MADE IN THE ORIGINAL ASSESSMENT PROC EEDINGS. THIS GOES TO SHOW THAT NEITHER DURING SURVEY PROCEEDINGS NOR DUR ING ASSESSMENT PROCEEDINGS THEREAFTER ANY SPECIFIC DISCREPANCIES W ERE NOTICED. UNDER THESE CIRCUMSTANCES AO SHOULD HAVE FOUND OUT AND RE CORDED THE DEFICIENCIES IN THE VOUCHERS/BILLS MAINTAINED BY TH E ASSESSEE WHICH WARRANTED 10% DISALLOWANCE. AO ALSO DID NOT MAKE AN Y ENQUIRIES WITH REGARD TO THE EXPENDITURE MADE WHICH COULD HAVE CAU SED A SHADOW OF DOUBT ON THE EXPENDITURE CLAIMED. ESTIMATED DISALLO WANCE CANNOT BE SUSTAINED SIMPLY BECAUSE THE VOUCHERS ARE SELF-MADE UNLESS THERE ARE CERTAIN DEFICIENCIES/DISCREPANCIES FOUND EITHER IN THE BOOKS OR IN THE VOUCHERS. IN CASE OF ASSESSMENT YEAR 2007-08 ALSO A D DID NOT RECORD ITA NOS.340&341/VIZAG/2012 & CO NOS.49&50/VIZAG/201 3 SRI DATTATREYA CONSTRUCTION & SERVICES, VISAKHAPATN AM 4 ANY FINDING THAT THERE ARE ANY DEFICIENCIES FOUND I N THE VOUCHERS OR BOOKS. THE RATIO OF PROFITS DECLARED IS ALSO IN LIN E WITH THAT OF THE EARLIER YEAR WHICH IS A SURVEY YEAR. THUS I FIND THAT THERE IS NO STRONG REASON FOR AO TO RESORT TO 10% DISALLOWANCE EVEN IN ASSESSMENT YEAR 2007- 08. IN VIEW OF THE ABOVE FACTS I FIND THAT THE ESTI MATED DISALLOWANCES MADE IN BOTH THE YEARS BY AD HAVE NO LEGS STAND AND HENCE DESERVE TO BE DELETED. 4. ON BEING AGGRIEVED REVENUE IS IN APPEAL BEFORE T HE TRIBUNAL. THE LD. DR HAS STRONGLY SUPPORTED THE ORDER PASSED BY A O. 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE HAS SUBMITTED THAT ALL THE EXPENDITURE CLAIMED BY ASSESSEE WITH S ELF MADE VOUCHERS ALREADY EXAMINED BY THE AO AND ASSESSMENT WAS COMPL ETED U/S 143(3) OF THE ACT. NOW THE AO IS NOT JUSTIFIED IN VERIFYI NG THE SAME DISALLOWING TO THE EXTENT OF 10% AND STRONGLY SUPPORTED THE ORD ER PASSED BY THE AO. 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. WE FIND THAT THE ASSESSING OFFICER DISALLOWED 10% OF T HE EXPENDITURE ON THE GROUND THAT THERE ARE NO PROPER BILLS AND VOUCHERS AND NO NAMES AND ADDRESSES OF THE RECIPIENTS. HE HIMSELF HAS OBSERV ED THAT THE ASSESSEES BUSINESS IS EARTH FILLING AND LIFTING AND TRANSPORT ATION OF READY CONCRETE MIX INVOLVING LARGE NUMBER OF LABOURERS. SO THE NA TURE OF THE BUSINESS AS OBSERVED BY THE AO THAT THE ASSESSEE HAS INCURRE D VARIOUS EXPENDITURE MOSTLY LABOUR CHARGES, GRAVEL PURCHASES , STONE PURCHASES, ITA NOS.340&341/VIZAG/2012 & CO NOS.49&50/VIZAG/201 3 SRI DATTATREYA CONSTRUCTION & SERVICES, VISAKHAPATN AM 5 SAND PURCHASES, METAL PURCHASES AND SITE EXPENSES. THE LD. CIT(A) AFTER CONSIDERING THE ENTIRE NATURE OF THE BUSINESS OF THE ASSESSEE CAME TO A CONCLUSION THAT THE ESTIMATION OF THE DISALLOW ANCE CANNOT BE SUSTAINED SIMPLY BECAUSE THE VOUCHERS ARE SELF-MADE UNLESS THERE ARE CERTAIN DEFICIENCIES OR DISCREPANCIES FOUND EITHER IN THE BOOKS OR THE VOUCHERS. SO FAR AS IN ASSESSMENT YEAR 2007-08, TH E LD. CIT(A) GAVE A FINDING THAT AO DID NOT RECORD ANY FINDING THAT THE RE ARE ANY DEFICIENCIES FOUND IN THE VOUCHERS OR BOOKS. THE RATIO OF PROFI TS DECLARED IS ALSO IN THE LINE WITH THAT OF THE EARLIER YEAR WHICH IS A S URVEY YEAR. ACCORDINGLY, DISALLOWANCE MADE BY THE AO IS DELETED. IT IS NOT THE CASE OF THE AO THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IS NO T GENUINE. THE AO HAS ONLY DOUBTED AND ON THE BASIS OF DOUBT EXPENDIT URE CANNOT BE DISALLOWED. 7. THEREFORE BY CONSIDERING THE FACTS AND CIRCUMSTA NCES OF THE CASE AND THE NATURE OF BUSINESS CARRIED OUT BY THE ASSES SEE, WE FIND NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD . CIT(A). THUS, THE APPEALS FILED BY THE REVENUE FOR THE ASSESSMENT YEA RS 2006-07 & 2007-08 ARE DISMISSED. 8. SO FAR AS CROSS APPEALS FILED BY THE ASSESSEE FO R THE ASSESSMENT YEARS 2006-07 & 2007-08 ARE CONCERNED, IT IS ONLY S UPPORTIVE, THEREFORE, ITA NOS.340&341/VIZAG/2012 & CO NOS.49&50/VIZAG/201 3 SRI DATTATREYA CONSTRUCTION & SERVICES, VISAKHAPATN AM 6 IN VIEW OF THE DISMISSAL OF THE REVENUES APPEALS, THESE CROSS APPEALS CANNOT SURVIVE. THUS, THE CROSS APPEALS FILED BY T HE ASSESSEE ARE ALSO DISMISSED. 9. IN THE RESULT, APPEALS FILED BY THE REVENUE ARE DISMISSED AND THE CROSS APPEALS FILED BY THE ASSESSEE ARE ALSO DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 27 TH NOV15. SD/- SD/- ( (( ( . . . . ) ( ) ( ) ( ) ( . .. . ) )) ) ( (( ( G. MANJUNATHA) ( (( ( V. DURGA RAO ) )) ) / // / ACCOUNTANT MEMBER / // / JUDICIAL MEMBER /VISAKHAPATNAM: 6 / DATED : 27.11.2015 VG/SPS / - 7 / COPY OF THE ORDER FORWARDED TO :8 1. , / THE APPELLANT THE ACIT, CIRCLE-1, KAKINADA 2. -., / THE RESPONDENT SHRI DATTATREYA CONSTRUCTION & SERVICES P. LTD., D.NO.9-21-19, FLAT NO.201, VINAYAGAR CENTRE, NORTH AVENUE, CBM COMPOUND, VISAKHAPATNAM. 3. : / THE CIT, VISAKHAPATNAM 4. : () / THE CIT(A), VISAKHAPATNAM 5. THE PRINCIPAL CIT-2, VISAKHAPATNAM 6. -, , / // / DR, ITAT, VISAKHAPATNAM 7 . . . . / GUARD FILE / BY ORDER // TRUE COPY // @A ( SR.PRIVATE SECRETARY ) , / // / ITAT, VISAKHAPATNAM